Essay Act 1881

1122 Words Sep 23rd, 2012 5 Pages
Short essay on the negotiable instruments in business law

The law relating to “negotiable instruments” is contained in the Negotiable Instruments Act, 1881. The Act extends to the whole of India. The Negotiable Instruments Act, 1881, has been amended for more than a dozen times so far.

The latest in the series are: (i) the Banking, Public Financial Institutions and Negotiable Instruments Laws (Amendment) Act, 1988 (effective from 1st April, 1989), and (ii) the Negotiable Instruments (Amendment and Miscellaneous Provisions) Act, 2002 (effective from 6th February, 2003). The provisions of all the Amendment Acts have been incorporated at relevant places in Part IV of this book.

The Negotiable Instruments Act, 1881, as
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But it should not contain any words prohibiting transfer, e.g., ‘Pay to A only’ or ‘Pay to A and none else’ is not treated as ‘payable to order’ and therefore such a document shall not be treated as negotiable instrument because its negotiability has been restricted.

It may be noted that documents containing express words prohibiting negotiability remain valid as a document (i.e., as an agreement) but they are not negotiable instruments as they cannot be negotiated further.

(b) Payable to bearer:

‘Payable to bearer’ means ‘payable to any person whosoever bears it.’ A note, bill or cheque is payable to bearer which is expressed to be so payable or on which the only or last endorsement is an endorsement in blank.

Thus, a note, bill or cheque in the form “Pay to A or bearer,” or “Pay A, B or bearer,” or “Pay bearer” is payable to bearer. Also, where an instrument is originally ‘payable to order,’ it may become ‘payable to bearer’ if endorsed in blank by the payee.

For example, a cheque is payable to A. A endorses it merely by putting his signature on the back and delivers to B with the intention of negotiating it (without making it payable to B or S’s order). In the hands of B the cheque is a bearer instrument.

Section 31 of the Reserve Bank of India Act:

It is important to note that the above definition is subject to the provisions of Section 31 of the Reserve Bank of India Act, 1934, which as amended by the Amendment

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